Earlier this month, the House Oversight and Government Reform Committee issued a staff report on the Obama Administration’s fuel economy/greenhouse gas (GHG) regulatory program. The report, A Dismissal of Safety, Choice, and Cost, is the product of a “multi-year Committee investigation” that includes three hearings, a transcribed interview of EPA Assistant Administrator Gina McCarthy, and a review of more than 15,000 documents obtained by the Committee from the EPA, the National Highway Traffic Safety Administration (NHTSA), the California Air Resources Board (CARB), and 15 automobile manufacturers.

Some key findings:

• The Administration performed an end-run around the law and ran a White House-based political negotiation, led by “czars” who marginalized NHTSA, the federal agency charged in statute with setting fuel economy standards.
• Contrary to the statutory scheme Congress created, the EPA became the lead agency in fuel economy regulation and NHTSA was sidelined. Contrary to Congress’s preemption of State laws or regulations “related to” fuel economy, CARB became a “major player” and an “aggressive participant in the process,” allowing unelected state regulators in Sacramento to set national policy outside the federal rulemaking process.
• The Administration violated the spirit – and possibly the letter – of the Administrative Procedure Act, Presidential Records Act, and Federal Advisory Committee Act by negotiating agreements on both the Model Year (MY) 2012-2016 and MY 2017-2025 standards behind closed doors with only a select group of stakeholders.
• The new fuel-economy/GHG standards will add thousands of dollars to the cost of new vehicles. Consumers are likely to incur net financial losses unless annual gasoline prices reach $5-$6 per gallon.
• Compliance with the new standards will require mass reductions that will, in turn, compromise vehicle safety. EPA and CARB officials mocked and belittled safety concerns raised by NHTSA.

In a law journal article and regulatory comment letter, I also make the case that the administration’s fuel-economy agenda trashes the separation of powers and administrative procedures. But the Committee’s report provides the first, detailed behind-the-scenes chronology of Team Obama’s fuel economy machinations, confirming what other critics suspected but could not document.

Some secrets of the sausage factory, though, may never come to light: “Despite multiple requests, the Executive Office of the President refused to provide any information on its involvement in developing the fuel economy and GHG emissions standards.”

In related news, House Oversight and Government Reform Chairmain Darrell Issa (R-Calif.), Rep. Jim Jordan (R-Ohio), who chairs the regulatory affairs subcommittee, and Rep. Mike Kelly (R-Pa.), an auto dealer, yesterday requested the White House Office of Information and Regulatory Affairs (OIRA) ”to return the [MY 2017-2025 fuel-economy/GHG] rule to the agencies for further consideration of its adverse consequences to consumers and the economy” (Detroit News, Aug. 22, 2012).

It’s doubtful OIRA will grant the request, and not only because NHTSA administrator David Strickland said the rule would be published “in days, not weeks,” and Department of Transportation Secretary Ray LaHood said, “It is going to happen . . . there’s no backing away.”

Team Obama wants to lock in the fuel-economy/GHG rule before the November elections. As the Committee’s report notes, “The Administration rushed to set the second round of fuel economy standards before the 2012 presidential election because, according to one EPA official, the President ‘wants to secure his legacy.’”

Particularly revealing in this regard is the November 2011 joint press release that LaHood and EPA Administrator Lisa Jackson issued when they proposed the new fuel-economy/GHG rule. The two agency heads actually boasted they were bypassing Congress: ”Today‘s announcement is the latest in a series of executive actions the Obama Administration is taking to strengthen the economy and move the country forward because we can’t wait for Congressional Republicans to act” [emphasis added].

A legislative proposal boosting average fuel economy to 54.5 mpg would not pass in the 112th Congress. Note also that NHTSA need not propose fuel economy standards for MYs 2017 and later until 2014. “We can’t wait” really means: We won’t let the people’s representatives decide — not now, not after the 2012 elections.

So don’t hold your breath waiting for EPA and NHTSA to reconsider their handiwork. In the meantime, check out this informative YouTube video by the National Automobile Dealers Association (NADA).

The EPA and NHTSA estimate the fuel-economy/GHG rule will add $3,000 to the average cost of a new motor vehicle in 2025. According to NADA, the $3,000 higher price tag means that 7 million drivers who can now afford to buy a new vehicle, won’t in 2025. The rule will also regulate out of existence the most affordable new vehicles, i.e. those costing $15,000 or less.

Earlier this week, House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) sent letters to three Obama administration officials regarding the veracity of their testimonies at an October 12 subcommittee hearing on the administration’s fuel economy policies.*

Issa’s letters — to National Highway Traffic Safety Administration (NHTSA) Administrator David Strickland, EPA Assistant Administrator for Air and Radiation Gina McCarthy, and EPA Director of Transportation and Air Quality Margo Oge – are identical in content.

The gist of the letters is that each administration witness denied under oath that EPA and California’s greenhouse gas emission standards are “related to” fuel economy standards, whereas in fact, according to Issa, ”regulating greenhouse gases and regulating fuel economy is a distinction without a difference.”

This matters for three inter-related reasons: (1) EPA is currently regulating fuel economy by setting motor vehicle greenhouse gas emission standards even though the Clean Air Act provides no authority for fuel economy regulation; (2) EPA in June 2009 granted California a waiver to establish motor vehicle greenhouse gas emission standards despite the Energy Policy Conservation Act’s (EPCA’s) express prohibition (U.S.C. 49 § 32919) of state laws or regulations “related to” fuel economy; and (3) the California waiver, by threatening to create a market-balkanizing “regulatory patchwork,” enabled the Obama administration to extort the auto industry’s support for EPA’s new career as greenhouse gas/fuel economy regulator in return for California and other states’ agreement to deem compliance with EPA’s greenhouse gas/fuel economy standards as compliance with their own.

As I will demonstrate below, greenhouse gas emission standards are highly “related to” fuel economy standards, and the administration witnesses cannot possibly be ignorant of the relationship. Do their denials of plain fact rise to the level of perjury?

In his letters to the Obama officials, Issa excerpts pertinent exchanges between them and Members of the Subcommittee:

Chairman Jordan: I guess maybe here’s the question — I’m not a legal scholar on this — but it seems that when you read the statute [EPCA], it talks about a regulation related to fuel economy standards, and greenhouse gases are certainly related to fuel economy standards, is that right?

Administrator McCarthy: They are closely aligned but they are different, Mr. Chairman.

*  *  *

Vice Chair Buerkle: I just have a quick question for the three of you. It’s a yes or no question, if you wouldn’t mind. Are the greenhouse gas rules — either EPA’s or the California rules — are they they related to fuel economy? Mr. Strickland, yes or no?

Administrator Strickland: No, they regulate greenhouse gas emissions.

Administrator McCarthy: They regulate greenhouse gas emissions.

Ms. Oge: They regulate greenhouse gas emissions.

Vice Chair Buerkle: So they’re not related to fuel economy, under oath.

Administrator Strickland: No. They’re greenhouse gas emission regulations.

Administrator McCarthy: We do not regulate fuel economy standards.

Vice Chair Buerkle: And all three of you agree with that?

Ms. Oge: Yes.

Administrator Strickland: Yes.

When asked if EPA and California’s standards are “related to” fuel economy standards, the administration witnesses offer a tautology: Greenhouse gas emission standards regulate greenhouse gas emissions. It is as if John Smith were asked whether he is related to Joe Smith and replied, “I am not my brother, I am me.”

Motor vehicle greenhouse gas emission standards implicitly – and inescapably – regulate fuel economy. EPA and NHTSA confirm this – albeit not in so many words – in their joint May 2010 greenhouse gas/fuel economy Tailpipe Rule.

As the agencies acknowledge (Tailpipe Rule, pp. 25424, 25327), no commercially proven technologies exist to filter out or capture carbon dioxide (CO2) emissions from fossil fuel-powered vehicles. Consequently, the only way to decrease grams of CO2 per mile is to decrease fuel consumption per mile, i.e., increase fuel economy. Carbon dioxide constitutes 94.9% of vehicular greenhouse gas emissions, and “there is a single pool of technologies . . . that reduce fuel consumption and thereby reduce CO2 emissions as well.”

That EPA and CARB are regulating fuel economy is also evident from the administration’s current plan to increase average fuel economy to 54.5 miles per gallon by 2025. The plan derives from EPA, NHTSA, and the California Air Resources Board’s (CARB’s) Interim Joint Technical Assessment Report, which proposed a range of fuel economy targets from 47 mpg to 62 mpg. The mpg targets are determined by – are simple reciprocals of – CO2 reduction scenarios:

Four scenarios of future stringency are analyzed for model years 2020 and 2025, starting with a 250 grams/mile estimated fleet-wide level in MY 2016 and lowering CO2 scenario targets at the rate of 3% per year, 4% per year, 5% per year, and 6% per year [p. viii].

The 54.5 mpg target represents a negotiated compromise between the 4% per year (51 mpg) and 5% per year (56 mpg) CO2 reduction scenarios (p. ix).

That the California greenhouse gas motor vehicle emissions law, AB 1493, is highly “related to” fuel economy is obvious from CARB’s 2004 Staff Report presenting the agency’s “initial statement of reasons” for its regulatory program.  The Staff Report’s recommended options for reducing greenhouse gas emissions (Table 5.2-3) are identical in substance, and often in detail, to fuel saving options presented in the National Research Council’s (NRC’s) 2002 fuel economy report (Tables 3-1, 3-2). A few options in the CARB list are not included in the NRC list. In each case, however, the CARB option is a fuel-saving technology, not an emission-control technology.

In addition, the text of AB 1493 clearly implies that CARB is to regulate fuel economy. AB 1493 requires CARB to achieve “maximum feasible” greenhouse gas reductions that are also “cost-effective,” defined as “Economical to an owner or operator of a vehicle, taking into account the full life-cycle costs of the vehicle.”  CARB rightly interprets this to mean that the reduction in “operating expenses” over the average life of the vehicle (assumed to be 16 years) must exceed the “expected increases in vehicle cost [purchase price] resulting from the technology improvements needed to meet the standards in the proposed regulation” (Staff Report, p. 148). Virtually all of the “operating expenses” to be reduced are expenditures for fuel. The CARB program cannot be “cost-effective” unless CARB regulates fuel economy.

Strickland, McCarthy, and Oge could not acknowledge what they must know to be true because otherwise they would have to admit:

1. EPA is regulating fuel economy, which is outside the scope of its delegated authority; and
2. CARB is regulating fuel economy, which is prohibited by EPCA.

Since EPA contends that its greenhouse gas/fuel economy motor vehicle standards compel the agency to regulate greenhouse gas emissions from large stationary sources, the administration witnesses also could not acknowledge the obvious without admitting that EPA’s entire greenhouse gas regulatory agenda rests on shaky legal grounds.

* I testified at the Subcommittee’s October 12 hearing on the first, private-sector witness panel, which also included Jeremy Anwyl (Edmunds.Com), Roland Hwang (Natural Resources Defense Council), and Scott Grenerth (Independent Trucker). The three Obama officials testified on the second, public-sector witness panel.